Monday, February 11, 2013

In previous blog posts we discussed the
IRS’s decision to deny the allocation of federal historic tax credits to the
corporate member of a redevelopment project partnership associated with the
rehabilitation of the Historic Boardwalk Hall in New Jersey. In United States Tax Court the partnership
(HBH) subsequently challenged the IRS’s decision to deny the corporate member
true partnership status and reallocate the credits. After initially winning its case, but later losing on appeal
before the Third Circuit Court of Appeals, HBH filed a petition asking the
Third Circuit to rehear the case. The
Third Circuit denied this petition, and HBH, intent on having the Third
Circuit’s decision overturned, subsequently filed a petition for review with
the US Supreme Court.

According to the rules governing the
Supreme Court, a petitioner like HBH is not entitled to review; rather, the
decision to review the Third Circuit’s decision for an error of law is a matter
of judicial discretion and is only granted by the Supreme Court for compelling
reasons. Indeed, at least 4 of the 9
Supreme Court Justices must agree to hear the case. Another significant obstacle for HBH is the
fact that significantly more petitions for review are filed with the Supreme
Court each term than the Court can possibly grant. The result is that the Supreme Court
generally accepts only 1% of petitions, typically choosing the cases it finds
most significant, particularly those posing important and unresolved
constitutional questions. Thus, while it seems likely that the Supreme Court
will ultimately deny HBH’s request, that does not necessarily mean the Court
wholly agrees with the Third Circuit’s opinion; it simply may not have the time
or resources to address the lower court’s decision. Of course, that would be little consolation
to HBH, particularly the corporate member, which had its tax credits
reallocated. HBH’s only hope is that the
Supreme Court finds the arguments advanced in its petition, which will be
discussed in later blog posts, sufficiently compelling.